AMITIAE - Friday 25 January 2013

Cassandra - Friday Review: The Weekend Arrives

apple and chopsticks


By Graham K. Rogers


Opening Gambit:

Apple's financial figures, comments, mayhem, despair. Digitimes retracts, bloggers do not. What is really behind the share price manipulation: is Apple fragmentation the end target? Cook on the future: hints and raised eyebrows, but few facts. Why Mac sales were lower: we were warned. 36 new LTE carriers. iPads in education. Intel to stop making desktop boards. Download to Win 7 costs how much? The surface costs how much? A trap for online journalists: failed.

Apple Q1 2013 Financial Report and Other Stuff

I just do not understand the financial markets, although a Tweet today helped me put it into some context and confirmed what I thought: "Stock isn't a scoreboard. It isn't a measure of success. It's a bunch of banks gambling 1000 times a second with computers. STOP CARING" (Rob Beschizza).

This is the picture as I see it. . . .

Apple released its results overnight (my time) and I put something online about the figures early morning from the Press Release, with some basic comments: income up, profits stable, 47.8 million iPhones sold (up), 22.9 million iPads (up); also 4.1 million Macs (down), and 12.7 million iPods (down). This was all pretty much expected. Next quarter Apple anticipates between $41 billion and $43 billion income. Most of the facts I used came from the Apple Press release.

Immediately the shares dropped and headlines such as Peter Svensson's, "Apple Q1 2013: Apple's Profit Rocket Hits Air Pocket" ignored the income and the fact that Apple is the most profitable company ever, but has his nose firmly against an imaginary brick wall, that ignores the long term life of the company. With the focus on doom, he was unable to find his way to the positive point about record income until the fifth paragraph. A look at the share prices including a graph is included in an article on Patently Apple who also include figures from the announcements. A point is also made that many miss that the quarter a year ago which is being compared, had 14 weeks rather than 13, so that $13.1 billion is better than last year.

Like me and some other long term Apple observers, Kate MacKenzie on Mac360 makes the point (again) that Apple is not a failing company - far from it - Wall Street has changed the rules of the game. . . . Record revenue, record profits, record product shipments just don't mean what they used to mean.

She is also critical - as we have been many times in the past - about the way Apple good news is often underplayed as that does not fit the narrative that the pundits are working on at the time, such as

No one wants to talk about the fact that the iPhone line outsold the Android line in the U.S. by about 2 to 1. Wall Street can't mention that because it doesn't fit the Samsung-is-the-new-Apple narrative.

On the same theme are comments from Chris Umiastowski on iMore who looks at what Wall Street is up to (see also my comments below) and has some interesting quotes from those who might really know better.

We were also reminded by John Gruber on Daring Fireball of the comments by Bruno J. Navarro on CNBC: "I think this is really a broken company that is over-owned," he said on Fast Money." Gruber makes suitable comments beneath. Perhaps related is what MacDaily News outlines concerning Jim Cramer and what is reported on CNBC (again). Cramer has been criticised in the past for the way he looks at and comments on Apple.

Another comment and link from John Gruber picks up on comments from 2004 from Steven Levy, "when they should have gone for market share, they went for profits" and that is still the case. Does Wall Street actually understand what running a company means?

Part of the clue as to why the drop occurred was in a sub-heading in an article by Josh Lowensohn, who headlines the record figures, then adds . . . "the company missed Wall Street's expectations on revenue" which is what we have seen before. They expected Apple to predict a higher figure: this is like a futures market for IT.

The analysts who prove over and over again that they really do not understand Apple by wrongly estimating the figures, go crazy when Apple reaches its own estimates, but miss theirs. Who is running Apple: Wall Street? Thank goodness they aren't with the displays of recklessness that have been seen in the last few years.

Even AppleInsider made a rare move to the negative, or at least the neutral, when their headline emphasised the "flat" earnings before the record figures and they used exactly the same PR fact sheet as me. Rene Ritchie on iMore had a more positive article and focussed more on the comments which are always sifted for significance.

One interesting comment (see Other Matters) concerned the fragmentation of other systems, which brings users to Apple and a lot of companies were mentioned in the context of the way more users are moving to Apple platforms. Rene also had some of the figures that were not in the PR sheet concerning downloads, income breakdowns and that there is now "$137.1 billion in cash": a $16 billion increase". That can't be bad for a broken company. The Q&A session also reveals much.

Actually, maybe that is part of the clue as to what Wall Street wants. If the share price is depressed enough, as well as making it cheaper to buy, that could make it possible for large investors to take control, or at least have some level of persuasion. If that were so, the board could be influenced. And if at some time in the future a new chairman were installed, that could lead to a breakup - already hinted at in some sources. After all the components of a company such as Apple are worth far more when hived off and there are plenty who are short-sighted enough to do this for short-term gains.

As well as iMore, AppleInsider had a lengthy note on comments made at the Financial report. This is sectionalised for easier analysis.

Perhaps related is one of the comments that came from the Q1 2013 earnings call when Tim Cook discussed the rumours that came last week concerning cuts in orders for iPhone parts. Seth Fiegerman on Mashable carries Cook's significant words, "Even if any particular data point were factual, it would be impossible to interpret what the data point meant for our overall business because the supply chain is very complex." AppleInsider also carried a report with similar points.

The fewer Macs sold caused some ripples, although it was less of a drop than PC makers experienced. One reason for this drop was production difficulties with the iMac and Apple warned about this. Kevin Bostic on AppleInsider has a look at the supply constraints problem with these machines, including comments from Peter Oppenheimer and Tim Cook.

Although it was the Financial report, a lot of reporters dig for information concerning future products and some pointed questions were asked, including on Apple TV (Gene Munster of course) which was skilfully fended off by Tim Cook. AppleInsider reports that he also spoke in a roundabout way of what we might expect and excited some (me included) with the bait comment, Apple's product pipeline is chock full of incredible stuff. No specifics of course. There was another comment that I like - that those asking for a cheap iPhone might weigh - when Cook said that they "could simply slap the Apple logo onto a product and it would sell, that's not their approach."

A report by Donna Tam reveals Tim Cook's evasiveness on the Apple TV question asked by Gene Munster (who has a thing about this) and the point that the answers seem to be the same as he gave last year to the same question (and questioner).

Another comment, reported by Daniel Eran Dilger on AppleInsider, concerned the rollout of LTE (4G) when Tim Cook mentioned the expansion from a current 24 carriers with 36 new LTE carriers joining its existing pool: Italy, Denmark, Finland, Switzerland, Philippines were named, and also several middle eastern countries. With the comments by the CEO of AIS last week, we wonder if Thailand will now be left off. Another source with similar information about Apple and LTE carriers, is Jeff Gamet on The MacObserver.

As I suggest, the analysts expect more than Apple will produce, despite record figures. On Fortune, Philip Elmer-DeWitt has a scorecard to see how these pundits fared with their predictions. A look at the dateline for this article appears to show that he is in Thailand right now. I think my sister's former partner has a resort there.

There was an interesting little fact reported that many missed although Steven Sande on TUAW writes that Cook mentioned it several times: the iCloud storage service now has more than 250 million users. Like the user base of iTunes and the app store, that is a solid customer base that has income flowing into Apple all the time.

Apple is reported to be holding a town hall meeting this morning (Friday), according to MacNN. This is when the boss wants to pass over lots of congratulations or other information directly to Apple staff (not all 80,000 of course - although there is a live feed) and they are encouraged to ask questions (in advance). The press is always keen to listen in.

Well, here is surprise: having caused mayhem in the blogosphere, sent Apple rumour sites into a tailspin and caused all manner of other ripples, Digitimes is now reversing its stance on the large screen iPhone rumour according to AppleInsider but then like all Apple rumours, these are never True until Apple says they are.

There has been some news in the last few days over the release of certain emails in an anti-poaching case in the USA. This is apparently illegal there, although it does not stop US companies here entering into similar agreements concerning their personnel. Some of the emails, Jacqui Cheng reports on Ars Technica, seem to point the finger at Apple and more specifically at Steve Jobs, who apparently threatened the CEO of Palm that he would go after them with patent litigation if they did not stop poaching Apple staff. The end story there is of course ironic as Palm was swallowed by HP and died. And as Steve Jobs is no longer with us, Tim Cook has been ordered to attend: as COO he should have known.

Some other Apple news now suggesting a new series of APIs could be coming with the next update to iOS (iOS7). Actually it is more than a suggestion, a report on a job advertisement on iPodNN includes some of what Apple is intending with the next update.

I have made some side references from time to time to the tablet program for Thai schoolchildren: budgeted down to the lowest possible and looking at the form, not the execution. Christopher Breen on MacWorld has a look at the iPad in education in a sound file that is linked to in the article in which he discusses the iPad with expert Fraser Speirs.

Also on education, AppleInsider examines the Boston Globe school program that has now switched from paper to iPads: its Newspaper In Education program will provide Apple iPads with digital subscriptions to the publication in Massachusetts public schools. This has been made possible by using $65,000 of vacation donation funds from Globe subscribers.

We still have room for some user tips. This time Christopher Breen continues with the printer and the ways in which this can be set up by users particularly with the print sheet.

And just a reminder for local users, the online shopping event for Chinese New Year is today (Friday). Thee are a number of discounts available, like 3,120 baht for MacBooks, so it may be the time to make the leap.

Half and Half

A bit of a shock in some ways came when I read the report from Brooke Crothers that Intel was to pull out of the business of making desktop circuits. However, as I thought about it, the effect on Apple and its MacPro may be less as Intel only makes the processors: Apple designs the boards themselves and they are not off the shelp, Phantip Plaza specials. Of course, the decision will also affect Phantip Plaza and other such places as there would have to be a serious restructuring if the stock carried in such places. Or AMD?

Other Matters

Another shock, at least to me as a long-term Mac user, who always buys the latest version of OS X, was a picture I linked to with one of the most arrogant and nonsensical offers I have seen. The image on Jury Me depicts an offer to users of Windows 8 who want to downgrade to Windows 7 (itself a significant move, not boding well for Redmond), but the users were then asked to fork over $125 for the - presumably - lesser and out of date product. As a note, the latest version of OS X is $19.99 and a full version comes with every Mac. A version developed originally from OS X and specifically for smaller devices, like the iPad or iPhone comes free with those devices. Think, guys. You pay for a downgrade?

Also on Microsoft we read in a number of sources about the release of the Surface, which leaves me a little neutral of course. Matt Burns on Tech Crunch thinks the price ($1018) is just right, which I do not understand, especially with his MacBook Air comparison. Jim Dalrymple on The Loop called this "The stupidest thing ever written about the MacBook Air" and there is something to that, especially as Burns conveniently ignores the lack of disk space on the Surface, compared to what is available on the MBA.

For $1018 the Surface is one of the best advertisements for the iPad I have ever seen. This is also the view taken by Rene Ritchie on iMore who writes that the "Surface Pro tablet pricing, makes us appreciate Tim Cook all over again". Note also his comparison of the MacBook Air, when he writes, "If an iPad isn't enough, and a MacBook Air is too much" then the Surface might work (for some, I guess if they have cash to throw away) suggesting that there is more space on the MBA than Burns was willing to admit.

Not that I need much convincing, but once in a while we get a real life story of those coming from the dark side who have joined us Mac users. David Morgenstern on ZDNet (who is a Mac user) discusses his neighbour who was a dyed in the wool user of Windows systems. But not now: "back in those days, Windows worked. It's stopped working." [My source here was MacDaily News.]

Oh, I have been saving this till last as it proves what I have been saying about some of the online sources who rarely produce original content and simply copy - rewording a few parts - what other outlets put online, so that within ten minutes a story is all over the web, no one wanting to wait or check. A site called X-Surface put out a spurious story deliberately recently, claiming to be someone who works at Microsoft (no blame for Redmond here at all) working on a new version of XBox. He relates how quickly the story became news and how there was "zero validation, no fact-checking, no source information". He lists several of the significant sites that failed to do a journalist's most important job: check the facts. The follow up is perhaps as interesting and revealing.

Graham K. Rogers teaches at the Faculty of Engineering, Mahidol University in Thailand. He wrote in the Bangkok Post, Database supplement on IT subjects. For the last seven years of Database he wrote a column on Apple and Macs.



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